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Where Taxpayers and Advisers Meet

Close company reorganisation and anti-avoidance

simplytax
Posts: 85
Joined: Wed Aug 06, 2008 3:34 pm

Close company reorganisation and anti-avoidance

Postby simplytax » Wed Oct 08, 2014 6:45 pm

Close company "A" with trade and rental business is considering ceasing the trade and continuing with the rental business.

Suggestion made was to sell the properties at MV to a Newco with consideration left outstanding and company "A" then liquidated with the debt due from Newco distributed in specie to the shareholders who will be the same shareholders of Newco. Assume CGT on sale of properties to Newco is at an accepatable amount with indexed base costs and that company "A" shares on liquidation will qualify for ER. Newco as a rental business after paying CT of 20% can repay each year part of the debt ( originally to the company wound up ) now held by the shareholders. Effective tax rate to shareholders then 20% rather than 40% if dividends paid out each year, with an upfront CGT cost of 10% on the liquidation.

Whilst it may be preferable not to retain the old trading company but to liquidate it and start afresh with a Newco as a property rental company in future, presumably transactions in securities provisions and the GAAR may be relevant here? Any alternative ideas to make use of ER on company A shares if to cease trading?

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